Foreword
For many years, Coinbase has been hailed with numerous titles: a representative of US cryptocurrency regulation, an entry-level choice for retail investors, and a cryptocurrency stock with fantastic upside potential. When I delved into its quarterly results ending September 30, 2025, I found that its greatest strength lies not in its trading itself, but in the ecosystem it has built and the value flows it facilitates within that ecosystem.

Thirteen years after its initial launch to simplify Bitcoin buying and selling, the company has transformed its vast customer base, custodied assets, and compliance capabilities into a powerful distribution channel.
... Despite the shift in cryptocurrency trading activity from retail to institutional over the past two years, Coinbase continues to expand its Potential Market Size (TAM) with a range of new products encompassing spot, derivatives, custody, and the Base app. The company calls this vision "Exchange for Everything." In today's analysis, I'll explore how Coinbase's diversified businesses work together to achieve this vision. Now let's get to the point. From Exchange to Ecosystem Cryptocurrency trading revenue typically disappears during bear markets, but it's now part of Coinbase's growing multi-product ecosystem. In Q3 2025, the company's net revenue reached $1.79 billion, a year-over-year increase of nearly 60%. During the same period, trading revenue grew by over 80% year-over-year due to a recovery in trading activity, while recurring subscriptions and services revenue grew by about one-third. However, what interests me is not how much money Coinbase makes, but how it makes that money. Coinbase profits from every layer of the crypto ecosystem it connects to, including institutional asset custody fees, yields on USDC balances, and derivatives spread clearing. Trading, once Coinbase's core business, has become the gateway to its ever-expanding range of services, encompassing custody, stablecoins, payments, and derivatives. The company referred to this new architecture as the "Everything Exchange" during its earnings call. When I first heard the term, I thought it was a marketing gimmick. But the simple idea behind it is that distribution channels are Coinbase's new moat. This bet became especially clear when Coinbase acquired Deribit, the world's largest crypto options platform, for $1.2 billion in August. This all-stock deal bridged the gap between the largest U.S. cryptocurrency exchange and the global derivatives market, which has long been outside U.S. jurisdiction. For the first time, a US-listed company can clear both spot and derivatives trades on the same platform. This deal has significantly boosted Coinbase's institutional business. In just six weeks after the acquisition, the Dutch company added $52 million to Coinbase's quarterly revenue. This represents approximately 40% of institutional trading revenue, which has more than doubled from $55 million in the same period last year to $135 million. The Stablecoin Game: Deribit expanded its instrumentation by adding options and futures, while USDC provides stable cash coverage. With USDC circulation reaching a record high of $74 billion, Coinbase's holdings of USDC on its platform also reached a record high of $15 billion. Stablecoin revenue rose 44% year-over-year to $354 million, becoming the largest single revenue stream in the subscriptions and services category. Coinbase, through Base and its new payments API, enables businesses to embed USDC deposits, payments, and fund flows directly into their applications. This entire stablecoin infrastructure and its fund flows have positioned Coinbase as an on-chain clearing bank. The rewards are substantial: stablecoin balances generate yield, the network expands through user usage, and user retention is achieved through the convenience it provides. Unlike the volatility of transactions, USDC yields grow with adoption. Every additional developer using Base or merchant integrating USDC increases Coinbase's circulating supply. Trust is the most difficult asset to scale, but Coinbase has replicated the success of other companies in its custody business. Last quarter, Coinbase's assets under custody (AUC) reached $300 billion, a 60% increase year-over-year, primarily driven by strong ETF inflows and increased corporate holdings of digital assets (DAT). Currently, Coinbase provides custody services for over 80% of the BTC and ETH in US spot ETFs. When institutions including BlackRock, Fidelity, and ARK Invest create or redeem shares, the assets are traded through Coinbase's vaults, and the fees for these services are included in Coinbase's revenue. Custody revenue accounts for less than 8% of Coinbase's total revenue, but its strategic value is significant. Custody builds trust, which in turn expands distribution reach and retains users. These custody clients are also more likely to try Coinbase's new product portfolio, including derivatives and USDC payments. Coinbase's latest acquisition, Echo, will be the latest beneficiary of the trust factor, as its customers can now issue, trade, and store tokens within the same compliance framework. Custody creates stickiness. I believe it's an invisible barrier that makes the "exchange for everything" vision possible. The evolution of profitability becomes more compelling when you look at the quantitative and qualitative changes in Coinbase's revenue structure from a broader perspective. In 2021, nearly 90% of Coinbase's revenue came from trading spreads. Today, nearly 40% comes from recurring revenue sources such as custody fees, stablecoin yields, and blockchain rewards. While its revenue remains heavily dependent on market cycles, these cycles no longer determine its survival. Each recent product launch by Coinbase has generated additional revenue. This is the benefit of leveraging distribution channels for new business lines. I like the vision of an "Exchange of Everything" because it doesn't try to build a haphazard product portfolio; that would certainly be easier. I find it interesting because it views cryptocurrency as a space people want to stay in, provided you offer an ecosystem of products that can naturally connect or create value together. Custody and stablecoins attract institutions and developers, while Base brings the creator economy on-chain. Deribit provides leveraged markets. Together, they form an infrastructure network, not just a simple trading platform, through which Coinbase profits in different areas of the cryptocurrency capital structure. Coinbase's vast product network is ubiquitous, helping it become a distribution pillar for the entire cryptocurrency industry. Looking ahead, Coinbase has indicated its intention to expand the "Exchange of Everything" architecture beyond current assets. During last week's earnings call, CEO Brian Armstrong acknowledged that the company's vision is central to the "next piece of the puzzle" it's building, which includes prediction markets and putting assets on-chain. We'll have to wait until Coinbase's product showcase in December to learn more. I see exciting potential for Coinbase here. If it can run prediction markets on the Base platform, the results can be tokenized, settled in USDC, and hosted within Coinbase's infrastructure, all under the same robust regulatory framework. If executed correctly, this would help Coinbase evolve from a platform that once traded assets into a platform for trading information, further demonstrating its distribution capabilities. A concern for Coinbase is that a large portion of its revenue relies on several highly volatile pillars. This quarter, approximately 20% of its total revenue came from USDC earnings, which are pegged to short-term Treasury rates. A one percentage point reduction in that interest rate could decrease quarterly stablecoin revenue by approximately $70 million. Coinbase states that its architecture is designed to be diversified, but the coming quarters will show whether this diversification will still be beneficial when key business operations fail to deliver satisfactory results.